Build-to-rent vs buy-to-let

Buy-to-let has proved to be a fantastic investment opportunity over the last 20 years, giving many landlords a way of capitalising on an ever-soaring property market.

But the shine has rather come off buy-to-let in recent years with tightening regulations, and a shift towards a new asset class is proving popular with both investors and tenants; build-to-rent.

Build-to-rent are purpose built properties designed specifically for renters. They benefit from communal areas, often have onsite maintenance teams and offer long tenancies.

Unlike buy-to-let properties which are traditionally on a residential street with owner-occupiers nearby, build-to-rent properties are surrounded by other renters and located close to city centres and public transport.

So, instead of a developer selling off the individual units to buy-to-let landlords or owner-occupiers, they keep hold of all the properties for rental. This means the developer has a steady rental income rather than recouping development costs through initial sales.

It’s an attractive financial model, particularly for pension funds and organisations who require a regular return rather than a one-off payment. Which comes to the crux.

Regardless of whether you’re a developer looking to do buy-to-let or build-to-rent, often the biggest stumbling block you’ll face isn’t how you’ll be paid out at the end. One cash lump sum or drip feed rental isn’t what’s keeping you awake at night – it’s how you’re going to finance the development in the first place.

Great developers always have more projects than funds available and ideally they need a model where they needn’t put in a penny upfront. That’s where Go Develop’s unique joint venture proposition comes in.

Our developer partners have no outlay with us, not a single penny. No deductions, no hidden fees, no costs. Instead, Go Develop provide full 100% land and build funding for new build property development from our own substantial resources. In fact, when you include the stamp duty and soft costs, this can actually be 115% of loan to cost. No one else in the country does this.

The future may well see a substantial shift towards build-to-rent, there are certainly ambitious plans in place and it’s got the full backing of the Government. It’s estimated that there are over 83 thousand units in the pipeline for build-to-rent according to the British Property Federation, and Knight Frank found that investors planned to commit £50 billion to the sector by 2020.

However, as we all know, the future is far from certain. Governments and government policy can change with the wind and the current flavour of the month may turn sour – quickly. When conditions are this unpredictable you need a funder that isn’t. With over 1,000 properties being built nationwide our partners can vouch that we offer funding certainty on time, every time.